Advisory firms with $500 million or more in assets under management continue to expand their market share despite their relatively low numbers. According to a new report from Cerulli Associates, these “mega teams” account for 11% of advisory practices but nearly two-thirds of total advisor-managed assets.
The growth of these mega teams is “channel-agnostic,” according to Cerulli. They include wirehouses, regional broker-dealers, independent broker-dealers, hybrid RIAs (registered with a BD and RIA) and independent RIAs.
Even within wirehouses, which still collectively manage the biggest share of client assets (35%) but are growing assets more slowly than other channels, mega teams are expanding their AUM (by 19%) while other smaller-AUM teams are “ceding assets,” according to Cerulli.
But the share of assets managed by hybrid and independent advisors, 37%, is growing at a much faster rate than the share managed by wirehouses.
The compound AUM growth by independent RIAs, for example, is three to four times that of BDs over the past one, five and 10 years, according to Cerulli. In the high-net-worth market, however, BDs have on average outperformed on asset growth.
In addition to BDs, independent broker-dealers are also vulnerable in terms of asset growth, which has led many, including Commonwealth, LPL and Cambridge, to position themselves as RIAs.
“This strategy is becoming increasingly important for IBDs, if they want to retain their most valued teams,” according to the Cerulli report. Adding to the competition are RIA consolidators, “which attract highly specialized financial planning and wealth management practices” and “will continue to shape the RIA landscape.”
Focus Financial, the first aggregator to go public, added eight new partner firms for a total of 58 by year-end 2018 and closed on two more deals with roughly $9 billion in assets in early 2019. It recently reported revenue growth of 37% for 2018, which helped boost a lagging stock price, now trading slightly above its IPO level.
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- Bigger Is Better, but More Complicated, for RIAs: Cerulli